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Indian food industry: A Recipe for its global success

India can emerge as a global leader in the processed food industry if it focuses on the manufacturing and human resource and markets its products the way other global players in the segment are doing.

By Anubhav Srivastava

April 20, 2009

It was an invitation from the Embassy of Ireland in Delhi for the ‘Classic Drinks of Ireland’ Reception on the occasion of St Patrick’s Week, Ireland’s National Holiday. Though the settings were informal, the occasion gave me an excellent opportunity to interact with His Excellency Mr. Kenneth Thompson, the Ambassador of Ireland in India, and exchange ideas on various issues. What struck me however was the presentation by Mr. Ronan Gillespie, an Irish food and drinks expert. Apart from giving details of the top-notch products being manufactured in Ireland, he focused on how Irish food and drinks products relate to the tradition, the culture and the climatic conditions of the island.

Another aspect that caught attention in his presentation was how the Irish food and drinks industry, worth over eight billion Euros (approximately Rs. 50,000 crore) annually and growing at a rate of 10 per cent annually, was combining cutting-edge manufacturing with traditional food processing techniques to deliver world-class products. Also how Bord Bia, the Irish Food Board with headquarters in Dublin and several international offices, is marketing Irish food, drinks and horticulture products across the world.

While coming back from the embassy, my thoughts shifted to the food industry in India. I wondered what is stopping India, one of the largest food producers in the world, to become global leader in processed food business? India has the advantage of diverse agro-climatic zones, ideal for a large number of horticulture and agro products. With a population of more than a billion people growing at 1.6 per cent annually and the second largest arable land area in the world, India is a formidable food production and consumption hub.

According to industry estimates, the India’s processed food industry was worth nearly 4,00,000 crore in 2006-07 and can become a 6,00,000 crore industry in 2015. The sector gives direct employment to about 20 lakh people. However there is a need to make it more export oriented. Though there are many stories of Indian cuisines, specially the curries, becoming popular in other countries because of the presence of the Indian diaspora, the Indian food industry is yet to achieve the place it deserves in the global food market estimated to be worth 3.2 trillion dollars (more than 160 trillion rupees).

The food processing industry in India is highly fragmented with 75 per cent of the units falling under the unorganised sector. The problem is compounded by the lack of proper infrastructure. In India, the wastage of fresh food is as high as 50 per cent. Most of the food processing units in India do not have the skill-set and the manufacturing facilities that can generate products that meet global quality standards. And despite a plethora of laws, adulteration remains a cause of concern. The excessive regulatory framework instead leads to a detrimental effect on the morale of the industry and breeds corruption.

Another area that needs attention from the policy-makers is the high tax-rates on the packaged and branded goods. The tax rate in India is around 30 per cent whereas in other European and Asian countries, it is between 10-15 per cent. Like other sectors of the economy, excellence in food processing necessitates a high level of research. But at present, not much attention is being paid to it. Lack of trained manpower in the Indian food processing industry is also hindering its progress.

Apart from addressing the above issues in the earnest, the Indian food industry will have to focus on several other aspects related to manufacturing and marketing of food products. The government and corporate sector must work jointly in this regard. The presentation by Mr. Ronan Gillespie about the products being manufactured in Ireland and my subsequent interaction with him helped me to identify the following aspects –

The availability and use of high quality raw materials so that the end product is world-class in quality.

Use of the latest manufacturing processes and technologies to ensure both quality and quantity.

Continuous market research in order to know the changing expectations of the consumers and making appropriate strategies to meet them.

Building an effective supply chain so that the right product reaches the right consumer.

Generating consumer interest by focusing on the tradition, history and the indigenous processing techniques associated with a food product.

Getting adequate human resource to meet the expectations of the consumers.

Though Indian food industry is facing manifold challenges, the opportunities ahead are huge. From a food deficit nation till the late seventies, India has become the second largest food producer in the world. Around a quarter of the country’s GDP now comes from food and agriculture production. This demonstrates that with the right strategy, India can emerge as a giant in processed food industry, at present dominated by a handful of nations.